Karnataka High Court
M/S Reliance Prolific Traders Pvt Ltd vs International Coach Builders Ltd on 13 June, 2012
Author: A.S.Bopanna
Bench: A.S. Bopanna
1
IN THE HIGH COURT OF KARNATAKA AT
BANGALORE
DATED THIS THE 13TH DAY OF JUNE, 2012
BEFORE
THE HON'BLE MR. JUSTICE A.S. BOPANNA
COMPANY APPLICATION NO.778/2009
IN
COMPANY PETITION NO.131/1988
Between :
M/s Reliance Prolific Traders Pvt. Ltd.,
(Formerly known as
M/s. Himadri Enterprises Pvt. Ltd.,)
No.62/2, Richmond Road
Bangalore-560 025
Rep. by its constituted Attorney
Sri D.Y. Muralidhara Rao. ... Applicant
(By Sri Ajoy Kumar Patil, Advs.)
And :
1. International Coach Builders Ltd.,
(In Liquidation)
Rep. by The Official Liquidator
Corporate Bhavan, 12th Floor
Raheja Towers
No.26-27, M.G. Road
Bangalore-560 001.
2. Karnataka State Financial Corporation
No.1/1, Thimmaiah road
Bangalore-560 052
Rep. by its General Manager
2
3. The Bangalore Electricity Supply Co., (BESCOM)
Corporate Office, K.R. Circle
Bangalore-560 001.
Rep. by its Managing Director. ... Respondents
(By Sri K.S. Mahadevan & Sri V Jayaram, Advs.
Sri Gururaj Joshi, Adv. for R2)
This Company Application is filed by the counsel for the
applicant has filed the above application under Rule 9 of the
Companies (Court) Rules, 1959, r/w Section 151 of CPC, praying to
direct the Official Liquidator and Karnataka State Financial
Corporation to refund/reimburse/pay the sum of Rs.45,76,671/-
(Rupees Forty Five Lakhs Seventy Six Thousand Six Hundred
Seventy One) only together with all expenses incurred by the
applicant along with interest at 12% per annum from the date of
payment till the date of refund.
This application having been reserved for orders, coming on
for pronouncement this day, the Court pronounced the following:
ORDER
The applicant was formerly known as M/s Himadri Enterprises Private Limited. In that capacity, the applicant had succeeded in the auction bid which subsequently came to be annulled by a Division Bench of this Court on 19.12.2008. The said Himadri Enterprises thereafter changed its name on 23.04.2009 to be known as Reliance Prolific Traders Pvt. Ltd. In that context, the present application is filed by the said Reliance Prolific Traders Pvt. Ltd., who is the applicant herein. 3 Hence, all references made hereinafter to the applicant herein would follow from the stage of participation of M/s Himadri Enterprises in the auction sale till the present stage.
2. The brief facts leading to the instant application are as follows:
The Company known as International Coach Builders Limited was ordered to be wound up by this Court. In the process of liquidation, the assets belonging to the Company in liquidation was to be realised. At the same time, the second respondent- Karnataka State Financial Corporation ('KSFC' for short) claimed right under Section 29 of the SFC Act as a secured creditor. Though the KSFC was not permitted to stand outside the process of winding up, they were permitted to sell the property in association with the Official Liquidator and KSIIDC. In that regard, C.A.No.394/2004 was allowed on 14.07.2006. On securing valuation of the property, the sale of assets of the Company in liquidation was advertised in the Newspapers on 02.11.2006. The applicant was one among the 4 12 bidders. In the inter se auction held on 11.12.2006, the applicant offered the highest price of Rs.700 lakhs in addition to which the dues to KIADB and BESCOM was agreed to be paid by the applicant. The entire amount was deposited by the applicant pursuant to which the KSFC filed C.A.No.1719/2006 seeking confirmation of the sale in favour of the applicant.
The said application was allowed on 29.01.2007 confirming the sale.
3. The applicant was thereafter put in possession of the property on 14.02.2007. The KSFC also communicated the same to the KIADB with regard to the transfer of lease in favour of the applicant. The applicant thereafter has cleared the dues amounting to Rs.33,23,757/- which was payable to KIADB by the Company in liquidation. The said payment was made on 27.02.2007. In addition, the maintenance charges of Rs.56,642/- was also paid. The KIADB also issued the possession certificate dated 12.03.2007 and executed the lease-cum-sale agreement on 10.04.2007. 5
4. When this was the position, one of the erstwhile Directors of the Company in liquidation called in question the confirmation of sale made in C.A.No.1719/2006 by filing an appeal in O.S.A.No.6/2007. The said appeal came to be ultimately allowed on 19.12.2008 setting aside the sale in favour of the applicant. With regard to the amount of Rs.700 lakhs which had been deposited as the auction sale price, the same has been refunded to the applicant. The issue in the instant application is however with regard to the amount which had been incurred by the applicant for taking possession and that was invested for improvement of the said property for its utilisation and also to protect the property. Since the respondents had not considered the request of the applicant, the applicant is before this Court seeking for a direction to the respondent Nos. 1 and 2 herein to refund the amount of Rs.40,61,095/-. The claim against BESCOM does not survive as it has already been refunded by them.
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5. The respondents have filed their objection statement. The fact relating to the applicant having been the successful bidder and being put in possession of the property is not disputed. The second respondent-KSFC contends that the sale was made in association with the Official Liquidator and also with the approval of the Company Court and as such, though the same has been ultimately set aside, the second respondent- KSFC cannot be held liable. It is further contended that the applicant being aware of the fact that one of the erstwhile Directors Sri Kirit Mozaria had objected to the confirmation of sale and had thereafter filed the appeal ought not to have expended amount on the property when the litigation was pending. In any event, no activity ought to have been carried out subsequent to the interim order dated 07.08.2007 granted in O.S.A.No.6/2007. The authority of the person who is representing the applicant to prosecute the instant application is also called in question.
7
6. The Official Liquidator has also filed the objection statement wherein the entire sequence of events have been referred including the order which resulted in the setting aside of the sale. Subsequent to the same, the events with regard to the refund of the auction sale price amount and the sale of the scrap material by the KSFC has also been referred. The thrust of the case on behalf of the Official Liquidator is that the sale of the property belonging to the Company in liquidation was permitted to be carried out by the KSFC and they have carried out the sale. Hence, insofar as the claim of the applicant, it is contended that keeping the said aspects in view suitable orders be passed by this Court.
7. In view of the rival contentions urged and the claim put forth by the applicant being disputed, the matter had been set down for evidence. Sri D.Y. Muralidhar Rao, the Power of Attorney holder ('POA holder' for short) on behalf of the applicant was examined as P.W.1 and the documents at Exhs.P1 to P64 have been marked. The said witness has been cross- 8 examined at great length. The respondents have not chosen to tender oral evidence but the KSFC, marked three documents as Ex-R1 to R3 on confronting the same to PW-1.
8. In the above background, I have heard Sri Ajoy Kumar Patil, learned counsel for the applicant, Sri V. Jayram, learned counsel for the Official Liquidator and Sri Gururaj Joshi, learned counsel for the second respondent-KSFC and perused the application papers.
9. The primary contention raised on behalf of the second respondent-KSFC is that the POA holder representing the applicant-company is not properly authorised and as such, the application filed by him based on fabricated POA, without power is not maintainable. It is contended that the POA dated 16.07.2009 produced along with the application admits of discrepancies and the same refers to the Resolution of the Board of Directors of Reliance Prolific Traders Private Limited on 31.03.2009 while the fresh certificate of incorporation states 9 that the said name was assumed only on 23.04.2009. Reference is made to the cross-examination of P.W.1 and it is contended that when these aspects were put to the said witness, he has produced the original of a totally different POA (Ex-P1) which is dated 08.06.2010 wherein the Resolution dated 14.04.2010 is referred. The said observations raised by the learned counsel for the KSFC has been satisfactorily explained by the learned counsel for the applicant. In that regard, even though the name of M/s Himadri Enterprises Private Limited was changed to the present name as indicated in the application with effect from 23.04.2009, the reference to the Resolution of Reliance Prolific dated 31.03.2009 does not render the POA invalid. This is for the reason that the POA itself has been executed on 16.07.2009 i.e., subsequent to 23.04.2009 and the caption in the POA indicates the name of Reliance Prolific, formerly known as Himadri Enterprises. Therefore the Resolution dated 31.03.2009 would have to be read as that of Himadri Enterprises. Further, the production of a different POA which is marked as Ex.P1 also stands explained. In that regard, 10 it is seen that the POA produced along with the application is not for an indefinite period. The POA produced along with the application is provided to be in force till 30.04.2010. Hence, a fresh POA has been executed which authorises Sri D.Y. Muralidhar Rao to represent the applicant-company.
10. The decision in the case of State Bank of Travancore
-vs- M/s. Kingston Computers (I) P.Ltd. (2011 AIR SCW 1948) relied on by the learned counsel for the KSFC is in the case where a Director was representing based on resolution which had not been proved. In the instant case, POA was executed by a competent person representing the applicant company in favour of the Donee of the power. In fact the said person is not representing the applicant for the first time in this proceedings. To the knowledge and acceptance of KSFC, the POA holder has been representing the applicant from the stage of auction and also in the earlier Court proceedings relating to confirmation of sale and the appeal thereof. Hence, the contention that the POA has been fabricated to file the 11 application which he is not authorised cannot be accepted. In fact the tenor of the cross examination and the answers given would indicate that the said witness had personal knowledge of all facts due to the representation on behalf of the company from the beginning. In any event, the claim made in the instant application is on behalf of the company and the POA holder is the Vice-President of Reliance Retail Limited, one of the Sister concerns of the applicant and has therefore been granted the power. Hence, when he is representing the company based on the POA executed pursuant to the Resolution of the company, the POA produced before the Court would indicate that he has the authorisation to represent the applicant. Hence, the contention in that regard is not sustainable.
11. The question therefore that arises for consideration is as to whether the applicant would be justified in seeking for payment of the expenses incurred? Only on considering this aspect, the quantum of claim and the manner of recovery would arise for consideration.
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12. The learned counsel for the second respondent-KSFC would vehemently contend that the applicant cannot be considered as the bonafide purchaser without notice. In that regard, he contends that the application for confirmation of the sale came up for consideration in CA No.1719/2006. In the said proceedings, the erstwhile Director of the Company in liquidation had filed an application to implead himself and he opposed the confirmation of sale. Though his objection was rejected by the Company Judge and the sale was confirmed on 29.01.2007, he had thereafter filed an appeal in OSA No.6/2007 wherein notice was ordered on 17.04.2007. Thus the applicant had notice of the proceedings. Hence, if the applicant chose to proceed further in developing the property, it was at their risk. In any event, an order of status-quo was granted in the appeal on 07.08.2007 and from that date no further work should have been undertaken by the applicant. The purchase is made knowing the risk involved and as such no refund can be sought is the contention.
13
13. The learned counsel for the applicant on the other hand pointed out that at the first instance the sale in fact was confirmed by the Company Court which had rejected the contention against confirmation and therefore the applicant bonafide believed that there was no infirmity whatsoever in the sale by which the applicant purchased the property. Further, in addition to the huge investment of Rs.700 lakhs on the purchase of the property which would otherwise remain a dead investment, the applicant had also to pay the lease amount to the KIADB and on execution of the lease-cum-sale deed on 10.04.2007, the applicant was required to comply with the conditions contemplated thereunder. The nature of the investment made by the applicant is for the improvement of the property and use it for their business purpose. As such the applicant is entitled to the expenses incurred as they have been denied the benefit of the property and would not be able to recover the investment made as a business proposition. 14
14. On noticing the rival contentions, I am of the opinion that the issue requires to be examined from two different facets. Firstly, the question as to whether an auction purchaser with notice of the Court proceedings against the sale can be considered as a bonafide purchaser or not would arise only in a circumstance when the auction sale of the property made for recovery of the money is subsequently set aside and in such circumstance if the auction purchaser seeks to resist the restitution of the property to its original owner and contends that he is entitled to retain and continue in possession of the property. In my opinion, in such a case, the question as to whether he was a stranger purchaser or as to whether he had notice of the objections raised against such sale or whether any other proceeding was pending would become relevant.
15. The other facet is, the way in which it shall be dealt when there is no attempt on the part of the auction purchaser for retention of the property purchased but, the auction purchaser only seeks reimbursement of the expenses incurred during the auction process and also for having invested in the property 15 subsequent to the auction. In that regard, whether the purchaser had notice of the proceedings would be irrelevant inasmuch as in all such proceedings for confirmation of sale, the auction purchaser will be party to the proceedings. The decision relied upon by the learned counsel for the applicant in the case of Haryana Financial Corporation and Another -vs- Rajesh Gupta (2010 (1) SCC 655) will however not throw any light inasmuch as in the said case, the issue was with regard to forfeiture of earnest money deposited by the auction purchaser, which was ordered to be refunded.
16. On the other hand, in order to appreciate in its correct perspective the aspect as to whether such claim can be made or not, it would be useful to refer to the case which was considered by the Hon'ble Supreme Court in Allahabad Bank vs. Bengal Paper Mills Co. Ltd and ors [(1999)4 SCC 383]. In the said proceedings, the property belonging to Bengal Paper Mills Co.Ltd., which was in liquidation was sold by the Official Liquidator. The second respondent in that case viz., M/s 16 Eastern Minerals and Trading Agency (Paper Division) purchased the property to revive the company. Accordingly, the company was being run by the auction purchaser. After nearly 10 years, the sale came to be set aside by the Hon'ble Supreme Court in the above noticed proceedings itself. At that stage, when the sale was set aside, the second respondent therein viz., the auction purchaser sought for refund of the amount and the expenditure incurred. While considering the same, the Hon'ble Supreme Court observed as hereunder:
"31. Learned counsel for the second respondent submitted that the second respondent would be entitled to recover the sale price as also all expenditure that it had incurred consequent upon the order of sale. We are in no doubt that the Official Liquidator must refund to the second respondent the sum of Rs. 2 crores. As to any other expenditure, the second respondent must apply to the High Court and satisfy it, first, that it was incurred and, secondly, that, in law, the second respondent is entitled to recover it."
(emphasis supplied)
17. The leave granted by the Hon'ble Supreme Court would indicate that in appropriate proceedings and in appropriate facts, a claim for the recovery of expenditure can be 17 maintained. If that was not the intention, the prayer made would have been rejected outright by the Hon'ble Supreme Court at that stage itself. Further guidance is also available in the subsequent proceedings relating to the same case of Bengal Paper Mills Company which is reported in [(2004)8 SCC 236]. The said proceeding in the same case would indicate that the auction purchaser had subsequently filed an application seeking clarification of the order passed earlier wherein refund was ordered and leave was granted to seek for expenditure. The clarification sought was that on the sale amount refunded, interest also be paid. The said application was no doubt rejected by the Hon'ble Supreme Court. But, a perusal of the said order at para-5 would indicate that pursuant to the liberty given by the Hon'ble Supreme Court in the earlier order, the auction purchaser had filed an application before the High Court seeking payment of the amount expended for the revival of the company and the said application was allowed and was pending in appeal.
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18. In that regard, it is seen that the Hon'ble Supreme Court while rejecting the application for clarification insofar as grant of interest had mainly kept in view the fact that the auction purchaser was in possession of the property from 15.09.1989 to 20.04.1999 for nearly ten years and had derived benefit from the property by running the industry. The reasoning assigned is as follows;
"12. Even on the principle of restitution, the claim of the applicant may not succeed. This is not a case where the applicant was deprived of both his money and the property purchased by him. There was, therefore, no failure of consideration. By the subsequent order of court, the sale was set aside; but during the interregnum, the applicant had the benefit of the assets he had purchased. The other contracting party, the Company in liquidation, was deprived of the use of its assets. The creditors who held the properties as security were deprived of their right to deal with the security or to enjoy the benefits of the security during the interregnum. In fact, the securities available to the creditors were utilised by the auction-purchaser, the applicant. In that situation, the applicant might have the obligation to account for the profits. Certainly, while rendering the main judgment, this Court was conscious of all these aspects while ordering refund only of the purchase price deposited without providing for payment of interest to the purchaser but at the same time leaving it open to the purchaser to work out its claim for the expenses incurred by it before the Company Court.
13. As stated in Goff and Jones: The Law of Restitution (6th Edn.) the law of restitution is the law relating to all claims, quasi-contractual or otherwise, which are founded upon the principle of unjust enrichment. It will, 19 therefore, be necessary to investigate that aspect even if we invoke Sections 70 and 72 of the Contract Act. Even if we invoke Section 65 of the Contract Act, the advantages derived by each of the parties will have to be determined and quantified in terms of money and any order in favour of the applicant can be made only after undertaking that exercise. This result cannot be achieved by seeking a clarification of the judgment as now done."
(emphasis supplied)
19. From a perusal of the emphasised portion, it will be clear that the Hon'ble Supreme Court has clarified that a purchaser can workout its claim for the expenses incurred and that would depend on facts of each case keeping in view the benefits derived by each of the parties, which has to be determined and quantified in terms of money and any order can be made only after undertaking that exercise. Keeping in view the said guidance, it is seen that in the case on hand, the applicant was put in possession of the property on 14.02.2007 and the sale was set aside on 19.12.2008. During the said period, the applicant was in possession of a property which was not maintained and consisted of dilapidated structure. Though the learned counsel for the KSFC relied on Mahazar dated 20 14.02.2007 (Ex.R-1) to contend that handing over possession does not show it was a dilapidated structure, the fact that the winding up order was passed on 30.11.1990 and the sale was on 29.01.2007 will speak volumes about the property devoid of maintenance. It is towards carrying out improvement of the property, the applicant claims to have invested the amount in the property. The status-quo order was passed on 07.08.2007. Therefore, the applicant has not put the property to use so as to derive benefit or advantage from the same. On the other hand, the nature of expenses as claimed by the applicant towards cleaning, fencing, drilling borewells, dismantling the dilapidated structure etc., if established are expenses which is ploughed in and it would enhance the value of the property which would add to the benefit of the Company in liquidation and secured creditor as it would fetch a higher value when it is re-auctioned. The applicant has not derived anything in return as a benefit. Therefore, the exercise of determining the expenses incurred by the applicant would have to be undertaken by examining each of the claims and admitting such of those 21 expenses which would add to the benefit of the Company in liquidation and the secured creditor.
20. In order to establish the expenses involved, the applicant has relied on the documents which are marked as exhibits and the same needs to be noticed at the outset. Ex.P13 is the receipt dated 07.06.2007 issued by the KIADB for the payment of Rs.20,000/- towards the permission for drilling two borewells. The document at Ex.P14 dated 26.05.2007 is the cash bill for Rs.6,000/- of the water diviner for locating six spots for the borewells. Ex.P15 dated 18.06.2007 is the running bill amounting to Rs.6,59,992.81ps for undertaking the civil work, the details of which are indicated in the Annexure. The demand draft dated 25.06.2007 towards payment of the same is at Ex.P16. Ex.P17 dated 29.08.2010 also relates to the ground water investigation done by SPG Technologies amounting to Rs.33,708/-. The demand draft dated 12.09.2007 relating to the payment is at Ex.P18. Ex.P19 is the final bill dated 02.07.2007 of SPG Technologies for the civil work detailed therein 22 amounting to Rs.9,10,934.43ps. The demand draft dated 23.07.2007 for payment is at Ex.P20. Ex.P21 is the invoice of Kiran borewells dated 30.08.2007 for supply of the pipes and submersible pumps for the borewell amounting to Rs.2,30,633/- and the delivery challan dated 25.06.2007 and receipt dated 05/10/2007 for payment of the same is at Ex.P58 and Ex.P22. Exhs.P23 to P30 are the bills and receipt of BESCOM for electricity consumption and the payment of the same during the period when the applicant was in occupation of the property. The documents at Ex.P31 to 35 are the bills for water consumption and maintenance charges of the KIADB and the payment towards the same. Ex.P37 is a communication dated 12.09.2009 issued by JB Security and House keeping services confirming that the security services was provided by them from 21.01.2007 to 31.08.2009 with the break up details, and acknowledging receipt of Rs.10,90,535.07ps. Ex.P38 is the invoice dated 08.06.2007 of Geo Engineering Pvt. Ltd amounting to Rs.68,539/- for the work indicated therein and the payment of the same is as per the demand draft dated 23 25.06.2007 at Ex.P39. By Ex.P40 dated 25.07.2007 and Ex.P41 dated 11.09.2007, the applicants are claiming the amount of Rs.1,50,000/- paid to Sri B.N.Shekar towards liason charges for obtaining power supply. Ex.P42 dated 03.07.2007 and Ex.P43 dated 16.07.2000 are for claiming Rs.22,000/- paid to Sri M.Yogish towards professional charges for obtaining approval of the sanctioned plans from KIADB. The Ex.P44 dated 23.05.2007 and Ex.P.45 are towards claiming Rs.20,807.90ps for carrying out topographical survey of the property. Ex.P46 is also in this regard and Ex.P47 is the counter foil of the demand draft which includes the payment towards topographical survey. The receipts of the Registrar's office for registering the cancellation deed and the expenses thereto is as per Ex.P48 and 49. The payment of Rs.11,030/- for audit of scrap quantity of structural steel is as per the receipt dated 30.10.2009 at Ex.P50 and the invoice dated 28.08.2009 for the same is at Ex.P55. Ex.P51 and Ex.P56 are the consolidated statement of the expenses referred to above under the different exhibits. In Ex.P56 the relevant portion towards 24 payment of legal expenses amounting to Rs.7,27,740/- is marked as Ex.P56(a) and (b).
21. In view of the contention raised by the learned counsel for the second respondent during the course of cross examination that certain expenses were incurred after the grant of interim order of status-quo, the documents at Exhs.P57 and P58 dated 25.06.2007 are marked to indicate that permission was obtained from KIADB earlier and the order, supply as well as commissioning of the submersible pumps and pipes were made earlier. Ex.P60 is also to the same effect. The letter dated 05.08.2009 of KSFC has been marked as Ex.P59 to indicate the fact that security personnel had been engaged by the applicant stands established as they were requested by the KSFC to continue them till 31.08.2009 even after the possession of the plot was returned to the KSFC. The details of the valuation of the scrap structural steel as carried out under Ex.P55 is sought to be established by marking the document at Ex.P61. 25
22. The tenor of the cross-examination and the contentions put forth on behalf of the second respondent would disclose that the resistence towards the claim made under the above noticed documents are that the expenses should not have been incurred by the applicant before the litigation had attained finality or at least after the order of status-quo was passed on 07.08.2007 in OSA No.6/2007. Further, the contention is also that the payments made are not supported by appropriate invoices and also that certain of the bills referred to Reliance Industries Ltd and Reliance Retail Ltd and as such the payments have not been made by the applicant company. Certain of the work carried out for the other entities have also been included in the bills is another objection.
23. Insofar as the objection that the applicant could not have incurred any expenses till the litigation attained finality would not be sustainable for the reason that I have already noticed the proposition and concluded that the expenses if incurred to enhance the value of the property or protect the 26 property which would be beneficial to the company and creditor, irrespective of the pendency of the litigation, the refund can be sought on establishing it as a fact. The mere pendency of litigation was not a bar but certainly no fresh investments if made after the interim order can be claimed. The Court notice at Ex.P-9 and 10 will disclose the appeal was filed belatedly and notice was received by the applicant towards end of May 2007 and status quo was ordered only on 07.08.2007. The exhibits noticed with reference to the dates will indicate that the process of work had commenced earlier though payment in some cases is subsequent. The said amount in any event had become payable. With regard to the bills being raised in the name of Reliance Industries Ltd and Reliance Retail Ltd and the demand drafts for payment having been issued in the name of Reliance Retail Ltd, it is explained that the applicant company as also the Reliance Retail Ltd are wholly owned subsidiaries of the Reliance Industries Ltd., and they were concerned with project implementation. Further as seen from the counter foils of the demand drafts, more particularly at 27 Ex.P16, P18, P20, client references made is to Himadri Enterprises i.e., the applicant as it was known earlier.
24. The respondents in any event have not contended and established that factually, the work has not been carried out within the property wherein the applicant was put in possession and that false claim is being made. Further, more particularly in a circumstance where the KSFC has also taken advantage of selling the dismantled structures so to as earn an amount of Rs.21,00,000/- as a result of the work performed by the applicant company, the expenses incurred by the applicant company to develop the property and the payments made on behalf of the applicant company to the contractors and vendors cannot be totally ruled out based only on technical plea raised by KSFC at this juncture. That apart, except for suggesting in the cross examination that quotations were not called before assigning the work, there is no suggestion nor has it been established that the same work could have been got done by incurring lesser expenses. However, the extent to which the 28 claim made should be accepted would still have to be considered by looking to the nature of the expenses incurred which adds to the value of the property and also incurred for protecting the property. The sinking of the borewell would be advantageous to the land and it could be an added factor when the property is once again put to auction. Similarly the fencing, cleaning and recharging the water sources and the other civil works carried out on the land would be the same position. In fact, the applicant would have been entitled to the amount realised from sale of dismantled structure if the sale was not set aside. The security charges though does not add to the value of the property, it has been incurred for protecting the property, which would have otherwise been incurred by the company in liquidation or the secured creditor. However, as against the amounts indicated in the bill for payment towards civil works, the demand draft issued is for a lesser amount than what is indicated in the bill. The amount to the extent paid would only be admissible since there is no material produced to indicate that the tax deducted at source has been remitted to the 29 department. With regard to the water divining charges, since only two borewells were permitted, the divining charges would be admissible only to that extent, though the bill indicates that divining charges is for six borewells. Keeping the above aspects in view, the amount indicated against the following exhibits are payable to the applicants:
Exhibits Rupees
Ex.P13 Borewell charges paid
i) 20,000.00
to KIADB for permission
ii) Ex.P14 Water divining charges 2,000.00
Ex.P15 & 16 Civil works as
iii) 6,12,010.00
detailed therein
Ex.P17 & 18 Ground water
iv) 32,943.00
investigation
Ex.P19 & 20 Civil works - final
v) 8,90,256.00
bill-as detailed therein
Ex.P37 (with Ex.P59) Security
vi) 10,90,535.00
charges
Ex.P38 and 39 Geo Technical
vii) 66,984.00
Investigation
Ex.P21, 22 and 58 submersible
viii) 2,21,763.00
pumps and pipes
Ex.P44, 45a & 46
viii) 18,519.00
Topographical survey
Total 29,55,010.00
25. Though the Exhs.P23 to P35 indicate the expenses incurred by the applicant towards electricity charges and water 30 consumption charges, the same is spent during the period when the applicant was in occupation and has been consumed for their purpose which would not be of benefit to the Company in liquidation. Hence, the said amount in any event would have to be borne by the applicant and would not be recoverable. The amount claimed under Exhs.P40 to 43 as being payable to Sri B.N. Shekar and Sri M Yogish towards liason charges for getting power supply sanctioned and also for securing approval of the plans from the KIADB is not admissible. The applicant being a company could have secured the said work through its employees. On the other hand, for the said purpose, if the applicant has chosen to engage intermediaries, the luxury of incurring such expenses cannot be passed on to the Company in liquidation or the secured creditors on the sale being set aside. The amount claimed under Ex.P55 for assessment of the structural steel was got done subsequent to the sale being set aside. Hence the same is disallowed. The legal expenses claimed in Ex.P56 (a) and (b) would indicate that the professional charges of the learned counsel is claimed towards 31 appearance in CA No.1719/2006 and OSA No.6/2007. In the said proceedings, there is no order as to costs. In both the said proceedings, the confirmation or otherwise of the sale was based on the action which was taken by the KSFC in association with the Official Liquidator. In such proceedings, if the applicant have also played their part to sustain the sale, the expenses incurred thereto in their own interest will have to be borne by them only and the respondents herein would not be liable.
26. In that view of the matter, the amount indicated in para No.24 above, would be payable to the applicant as a consequence of the sale being set aside and the amount being incurred by the applicant without returns. Since the property belongs to a company which is under liquidation and further since the KSFC is yet to recover its dues, the amount is payable without interest. The question however is as to which of the respondents should be directed to pay the amount to the applicant. Learned counsel for the applicant by referring to the 32 orders whereby the sale of the assets was permitted by the Court, contended that the KSFC was permitted to sell the property and therefore, the defect which resulted in setting aside, is due to their action and as such they would be primarily liable. In any event, the relief is sought against the Company in liquidation also. The learned counsel for the KSFC would contend that the sale made was not by standing outside the winding up proceedings but was in association with the Official Liquidator and the KSFC alone cannot be held liable if any amount is held to be payable.
27. In that regard, it cannot be in dispute that though the property was sold by the KSFC, the same was in association with the Official Liquidator and when such responsibility is cast on the Official Liquidator also to ensure the sale be conducted in accordance with law and when the Division Bench has found fault with the procedure, there would be joint responsibility. However, in the instant case, the undisputed position is that the dismantled steel structures and other materials which was 33 available in the property due to the work of dismantling carried out by the applicant, which would in a normal circumstance have enured to the benefit of the applicant has been subsequently sold for Rs.21,00,000/- by the KSFC. The said amount is available with the KSFC. Further, when the property is reauctioned, it would fetch a higher value and the liability of the KSFC in any event would be recoverable. The said amount with accrued interest will cover the major portion of the amount which is held as payable to the applicant. The balance amount shall also be borne by the KSFC for the present since no steps have been taken so far to sell the property despite the sale being set aside and the SLP filed by the KSFC being dismissed on 08.06.2009. The company in liquidation is also left without any benefit. To that extent of the amount beyond Rs.21,00,000/-, the KSFC would be entitled to seek interest at 6% p.a. while ultimately claiming that amount from the sale proceedings in addition to claiming its loan dues.
34
28. In result, the following;
ORDER
i) The application is allowed in part.
ii) The respondents 1 and 2 are held liable to pay the sum of
Rs.29,55,010/- to the applicant.
iii) The said sum is however directed to be paid by the second respondent for the reason indicated in para No.27 supra.
iv) The payment shall be made by the second respondent within six weeks from this day, failing which it shall carry interest at 12% p.a. after the period of six weeks till realisation.
v) Parties to bear their own costs.
Sd/-
JUDGE
akc/bms